. Mr. Jayanth sells and consigns certain Goods to Mr. Srikanth for cash and sends the Railway Receipt to him. Mr. Srikanth becomes insolvent and while the Goods are in transit, he assigns the Railway

Maan · 6 Jun 2024

Under the Sale of Goods Act, an unpaid seller has the right to stop the goods in transit if the buyer becomes insolvent. This right can be exercised if the goods are in transit and the seller retains ownership or a lien on the goods. Scenario 1: Mr. Naveen unaware of Mr. Srikanth's insolvency: Since Mr. Naveen was unaware of Mr. Srikanth's insolvency and acted in good faith, he is a bona fide purchaser. Therefore, Mr. Jayanth cannot exercise the right of stoppage in transit because Mr. Naveen’s rights to the goods are protected under the law. Scenario 2: Mr. Naveen aware of Mr. Srikanth's insolvency: If Mr. Naveen was aware of Mr. Srikanth's insolvency at the time of the assignment of the Railway Receipt, he is not considered a bona fide transferee for value without notice. In this situation, Mr. Jayanth can exercise his right of stoppage in transit since the goods are still in transit, and the transferee (Mr. Naveen) does not have the protection normally accorded to a bona fide purchaser. So in short, If Mr. Naveen was unaware of Mr. Srikanth's insolvency, Mr. Jayanth cannot exercise the right of stoppage in transit as Mr. Naveen is a bona fide purchaser. If Mr. Naveen was aware of Mr. Srikanth's insolvency, Mr. Jayanth can exercise the right of stoppage in transit since Mr. Naveen is not protected as a bona fide purchaser.